Q2 2024 Organon & Co Earnings Call

Mandeep: Thank you for standing by. My name is Mandeep and I'll be your operator today. At this time, I'd like to welcome everyone to the Organon Q2 2024 Ernie's Call Webcast. All lines be placed on mute to prevent any background noise.

Operator: I would like to welcome everyone to the Organon Q2 2024 Ernie's call webcast. All wants to be placed on mute for any background noise.

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Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Jennifer Halchak, Head of Investor Relations. You may begin.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star or follow the number one under the telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.

Mandeep: After the speaker remarks, there'll be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.

Jennifer Halchak: I would now like to turn the call over to Jennifer Halchak, Head of Investor Relations. You may begin.

Mandeep: I would now like to turn the call over to Jennifer Halchak, Head of Investor Relations. You may begin.

Jennifer Halchak: Thank you, operator.

Jennifer Halchak: Thank you, Operator. Good morning, everyone.

Jennifer Halchak: Good morning, everyone. Thank you for joining Organon's second quarter 2024 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, and Matt Walsh, our Chief Financial Officer. Also joining us for the Q&A portion of this call is Organon's Head of R&D. Juan Camilo Arjona Ferrerra. Today we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our Organon Investor Relations website at www.organon.com.

Jennifer Halchak: Thank you, Operator. Good morning, everyone. Thank you for joining Organon's second quarter 2024 earnings call.

Speaker Change: With me today are Kevin Ali, Organon's Chief Executive Officer, and Matt Walsh, our Chief Financial Officer. Also joining us for the Q&A portion of this call is Organon's Head of R&D, Juan Camilo Arjona-Ferreira.

Speaker Change: Today, we will be referencing a presentation that will be visible during this call for those of you on our webcast.

Speaker Change: This presentation will also be available following this call on the Events and Presentations section of our Organon Investor Relations website at www.organon.com.

Jennifer Halchak: Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10-K and subsequent periodic filings. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered as supplement to and not a substitute for financial measures prepared in accordance with GAAP.

Jennifer Halchak: Thank you for joining Organon's second quarter 2024 earnings call. With me today are Kevin Ali, Organon's Chief Executive Officer, and Matt Walsh, our Chief Financial Officer. Also joining us for the Q&A portion of this call is Organon's Head of R&D, Juan Camilo Arjona-Ferreira.

Speaker Change: Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements.

Jennifer Halchak: Today we will be referencing a presentation that will be visible during this call for those of you on our webcast. This presentation will also be available following this call on the events and presentation section of our Organon Investor Relations website at www.organon.com. Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking statements. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the Securities and Exchange Commission, including our 10-K and subsequent periodic filings.

Speaker Change: Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business.

Speaker Change: which are discussed in the company's filings with the Securities and Exchange Commission, including our 10-K and subsequent periodic filings.

Jennifer Halchak: In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation. I would now like to turn the call over to our CEO, Kevin Ali. Good morning.

Speaker Change: In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to, and not a substitute for, financial measures prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

Jennifer Halchak: A reconciliation of these non-GAAP measures to the comparable GAAP measures is included in the press release and conference call presentation.

Kevin Ali: I would now like to turn the call over to our CEO, Kevin Alley. Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our second-quarter results. For the second quarter of 2024, revenue was $1.6 billion, representing a 2% growth rate at constant currency. The women's health franchise grew 3%, our biosimilist franchise grew 22%, and our status branch franchise was down 1%. In the second quarter, adjusted EBITDA was $513 million, representing a 31.9% adjusted EBITDA margin, which includes $15 million of IPR&D expense. Adjust the diluted EPS was $1.12. We have had solid revenue growth in the first half of the year, 4% at constant currency, and we're on track to deliver our third consecutive year of constant currency revenue growth.

Kevin Ali: Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our second quarter results. For the second quarter of 2024 revenue was $1.6 billion, representing a 2% growth rate at constant currency. The Women's Health franchise grew 3%, our Biosimilars franchise grew 22%, and our Established Brands franchise was down 1%. In the second quarter, Adjusted EBITDA was $513 million, representing a 31.9% Adjusted EBITDA margin, which includes $15 million of IPR&D expenses. The adjusted diluted EPS was $1.12.

Speaker Change: I would now like to turn the call over to our CEO , Kevin Ali.

Kevin Ali: Good morning, everyone, and thank you, Jen. Welcome to today's call, where we'll talk about our second quarter results.

Kevin Ali: For the second quarter of 2024, revenue was $1.6 billion, representing a 2% growth rate at constant currency.

Kevin Ali: The Women's Health franchise grew 3%, our Biosimilars franchise grew 22%, and our Established Brands franchise was down 1%.

Kevin Ali: In the second quarter, adjusted EBITDA was $513 million, representing a 31.9% adjusted EBITDA margin, which includes $15 million of IPR&D expense.

Kevin Ali: We have had solid revenue growth in the first half of the year of 4% of constant currency, and we're on track to deliver our third consecutive year of constant currency revenue growth. Given year-to-date performance and our view into the rest of the year, we have narrowed our range for full year 2024 revenue around the midpoint to $6.25 billion to $6.45 billion. The guidance represents constant currency revenue growth of 2% to 4.7% exchange for the full year.

Kevin Ali: Adjusted diluted EPS was $1.12.

Kevin Ali: We have had solid revenue growth in the first half of the year of 4% of constant currency and we're on track to deliver our third consecutive year of constant currency revenue growth.

Kevin Ali: Given year-to-date performance and our view into the rest of the year, we have narrowed our range for full year 2024 revenue around the midpoint to $6.25 billion to $6.45 billion. The guidance represents constant currency revenue growth of 2% to 4.7% x exchange for the full year. Year-to-date adjusted EBITDA margin was 32.5%, which includes $30 million of IPR&D and milestone expense incurred in the first six months of the year. We are running at the high end of our full-year adjusted EBITDA margin range of 31 to 33%. Whether you look at it with or without the impact of IPR&D, year-to-date EBITDA margin performance reflects actions we have taken to contain operating expenses, and the first half of the year also benefited from favorable timing of spend.

Kevin Ali: Given year-to-date performance and our view into the rest of the year, we have narrowed our range for full year 2024 revenue around the midpoint to $6.25 billion to $6.45 billion.

Kevin Ali: The guidance represents constant currency revenue growth of 2% to 4.7% as exchanged for the full year.

Kevin Ali: Year-to-date adjusted EBITDA margin was 32.5%, which includes $30 million of IP R&D and milestone expenses incurred in the first six months of the year. We are running at the high end of our full year adjusted EBITDA margin range of 31 to 33%, whether you look at it with or without the impact of IPR&D. Year-to-date EBITDA margin performance reflects actions we have taken to contain operating expenses, and the first half of the year also benefited from favorable timing of spending.

Kevin Ali: Year-to-date adjusted EBITDA margin was 32.5%, which includes $30 million of IPR&D and milestone expense incurred in the first six months of the year.

Kevin Ali: We are running at the high end of our full-year adjusted EBITDA margin range of 31 to 33 percent, whether you look at it with or without the impact of IPR&D.

Kevin Ali: Year-to-date EBITDA margin performance reflects actions we have taken to contain operating expenses.

Kevin Ali: We expect SG&A expense to pick up in the second half of the year due to planned expenditures related to rolling out new products like the migraine medicines and further investment in Nexplanon. Given that timing, we're holding to our 31% to 33% adjusted EBITDA margin range for the full year. From a capital allocation standpoint, year-to-date we're tracking well for our commitment to deliver $1 billion of free cash flow before one-time spend-related costs in 2024. That strong cash flow will provide financial flexibility to comfortably service our dividend, which is our number one capital allocation priority, and also gives us optionality to make discretionary debt repayments and to continue to pursue sensible business development.

Kevin Ali: And the first half of the year also benefited from favorable timing of spend.

Kevin Ali: We expect SG&A expense to pick up in the second half of the year due to planned expenditures related to rolling out new products like the migraine medicines and further investment in next. Given that timing, we're holding to our 31 to 33% adjusted EBITDA margin range for the full year.

Kevin Ali: We expect SG&A expense to pick up in the second half of the year due to planned expenditures related to rolling out new products like the migraine medicines and further investment in Nexplanon.

Kevin Ali: From a capital allocation standpoint, year to date, we're tracking well to our commitment to deliver $1 billion of free cash flow before one-time spin-related costs in 2024. That strong cash flow will provide financial flexibility to comfortably service our dividend, which is our number one capital allocation priority, and also gives us optionality to make discretionary debt repayments and to continue to pursue sensible business development.

Kevin Ali: From a capital allocation standpoint, year-to-date, we're tracking well through our commitment to deliver $1 billion of free cash flow before one-time spin-related costs in 2024.

Kevin Ali: Let's move now to discuss our franchise performance. Growth in women's health was driven by continued strength in Nexplanon, which is up 13% XFX in the second quarter. Last year, we took action to position Nexplanon for a strong 2024, and that is showing up in year-to-date constant currency growth of 22%. In the US, Nexplanon grew 8% in the second quarter. We benefited from Nexplanon's leadership in the US contraception market, our pricing strategy, including management of the 340B discount program, as well as continued physician demand growth. Outside the US, Nexplanon grew 27% XFX in the second quarter, primarily driven by our expansion and supply capabilities, and so we are now able to better meet the demand in our access markets, which we cited as a priority for us in 2024.

Kevin Ali: Growth in women's health was driven by continued strength and neck spinal, which was up 13% XFX in the second quarter. Last year we took action to position Nexpanon for a strong 2024, and that is showing up in year-to-date constant currency growth of 22%. In the U.S., Nexplanon grew 8% in the second quarter. We benefited from its leadership in the U.S. contraception market, our pricing strategy, including management of the 340B discount program, as well as continued physician demand growth.

Kevin Ali: Let's move now to discuss our franchise performance.

Kevin Ali: Growth in women's health was driven by continued strength in Nexplanon, which is up 13% XFX in the second quarter. Last year, we took action to position Nexplanon for a strong 2024, and that is showing up in year-to-date constant currency growth of 22%.

Kevin Ali: Outside the US, Nexplanon grew 27% XFX in the second quarter, primarily driven by our expansion and supply capabilities. As a result, we are now able to better meet the demand in our access markets, which we cited as a priority for us in 2024. But we also benefited from increased demand in countries in the Yukon region. Given its strength and performance year to date, we expect Nexpanon can achieve constant currency full year revenue growth in the low teens.

Kevin Ali: Outside the U.S., Nexplanon grew 27% XFX in the second quarter, primarily driven by our expansion and supply capabilities, and so we are now able to better meet the demand in our access markets.

Kevin Ali: But we also benefited from increased demand in countries and the UKAN region. Given strength in performance year-to-date, we expect Nexplanon can achieve constant currency full-year revenue growth in the low teens. This would be our best year in Nexplanon, and also puts us closer to the $1 billion mark for next year. With regard to the Nexplanon five-year study, the study met its primary endpoints, showing contraceptive effectiveness and no new safety signals. Based on this data, we are beginning to prepare for regulatory submission in the US, EU, and UK. We continue to believe that would put us on track for potentially US launch of the Nexplanon five-year indication in 2026, pending FDA approval.

Kevin Ali: This would be our best year for Nexplanon and also puts us closer to the $1 billion mark for next year. With regard to the next but on five-year study, the study met its primary endpoints, showing contraceptive effectiveness and no new safety signals.

Kevin Ali: and also puts us closer to the $1 billion mark for next year.

Kevin Ali: With regard to the Nexplanon five-year study,

Kevin Ali: We continue to believe that would put us on track for a potential U.S. launch of the Nexplanon 5-year indication in 2026, pending FDA approval.

Kevin Ali: We see this launch as an important event because it would mean that we would have data exclusivity on the five-year claim for three years. That means between 2026 and 2029, no generic with five-year duration could come to the US market. Further, any generic would need to have a different insertion vice, until our device patent expires in 2030. We remain very optimistic about next non-sutra prospects and the expanding potential of the brand.

Kevin Ali: We see this launch as an important event because it would mean that we would have data exclusivity on the five-year claim for three years.

Kevin Ali: That means between 2026 and 2029, no generic with five-year duration could come to the U.S. market. And further, any generic would need to have a different insertion device until our device patent expires in 2030.

Kevin Ali: We remain very optimistic about Nexplanon's future prospects and the expanding potential of the brand.

Kevin Ali: Moving on to other women's health, our global fertility business was down 8% xfx in the second quarter. In the US, we are seeing patient volume in the self-pay market level off. Our business has been shifting towards the inverse market, which is largely dominated by PBMs, and we've had good success here. In fact, you may recall that in the fourth quarter of last year, we secured broad access to the largest PBM in the country. Also, weighing on US fertility results is that we had a very strong buy-in of fallestim in the fourth quarter of last year that was related to both the onboarding of the large customer, as well as to the exit of a spin-related interim operating model.

Speaker Change: Moving on to other women's health.

Kevin Ali: Our global fertility business was down 8% XFX in the second quarter.

Kevin Ali: In the U.S., we are seeing patient volume in the self-pay market level off.

Kevin Ali: Our business has been shifting towards the reimbursed market, which is largely dominated by PBMs, and we've had good success here. In fact, you may recall that in the fourth quarter of last year, we secured broad access to the largest PBM in the country.

Kevin Ali: In China, our second largest fertility market, we're seeing a slower than expected roll-out of the province-by-province effort to expand reimbursement of procedures using assisted reproductive technology or ART. But going forward, we remain very optimistic about this initiative expanding to other provinces. We have seen strong double-digit growth in some of the larger provinces where reimbursement has already been implemented; for example, in Beijing. Given year-to-date performance, we believe global fertility performance for the full year will be flat compared to our initial expectations of a high single-digit increase. Still, that guide implies good growth in the second half, which will be coming from gradual uptake of ART reimbursement in China, coupled with lapping a weaker fertility market in China in the second half of last year.

Kevin Ali: In China, our second largest fertility market, we're seeing a slower-than-expected rollout of the province-by-province effort to expand reimbursement of procedures using Assisted Reproductive Technology, or ART.

Kevin Ali: But going forward, we remain very optimistic about this initiative expanding to other provinces.

Kevin Ali: We have seen strong double-digit growth in some of the larger provinces where reimbursement has already been implemented, for example, in Beijing.

Kevin Ali: Given year-to-date performance, we believe global fertility performance for the full year will be flat compared to our initial expectations of a high single-digit increase. Still, that guide implies good growth in the second half, which will be coming from gradual uptake of ART reimbursement in China, coupled with lapping a weaker fertility market in China in the second half of last year. We also will benefit from footprint expansion in other international markets. Moving now to slide six, where we take a look at revenue by geography.

Kevin Ali: Given year-to-date performance, we believe global fertility performance for the full year will be flat compared to our initial expectations of a high single-digit increase. Still, that guide implies good growth in the second half.

Kevin Ali: which will be coming from gradual uptake of ART reimbursement in China coupled with lapping a weaker fertility market in China in the second half of last year. We also will benefit from footprint expansion in other international markets.

Kevin Ali: We also will benefit from footprint expansion in other international markets.

Kevin Ali: We see 2025 as a rebound year, with very strong growth for fertility underpinned by continued ART-expanded reimbursement in China, international expansion, and performance in the U.S. that won't have the noise of the IOM exit.

Kevin Ali: We see 2025 as a rebound year with very strong growth for fertility underpinned by continued ART expanded reimbursement in China, international expansion, and performance in the U.S. that won't have the noise of the IOM exit.

Kevin Ali: Let's move now to our biosimilars franchise, which grew 22% at constant currency in the second quarter and 33% year-to-date. The exceptionally strong first half performance was driven by continued uptake of Hadlema in the U.S. Following the launch in July of last year, along with the timing of an international tender for Entrezont. For the full year, we expect the biosimilish franchise to deliver strong growth in the low teens XFX. U.S. Hadlema sales were $20 million in the second quarter. Throughout the second quarter, Hadlema was a leading humoribiosimilar with regard to total prescriptions, pointing to prescriber preferences for our product.

Speaker Change: Let's move now to our Biosimilars franchise, which grew 22% at constant currency in the second quarter and 33% year-to-date.

Kevin Ali: The exceptionally strong first half performance was driven by continued uptake of HADLIMA in the U.S.

Kevin Ali: Following the launch in July of last year, along with the timing of an international tender for Entrezant,

Kevin Ali: For the full year, we expect the Biosimilar franchise to deliver strong growth in the low teens XFX.

Kevin Ali: U.S. HADLIMA sales were $20 million in the second quarter. Throughout the second quarter, HADLIMA was a leading Humira biosimilar with regard to total prescriptions.

Kevin Ali: From the first quarter to the second quarter, total prescriptions for Hadlema grew over 60%, consistent with the TRX trend since launch. We are having success because our strategy is focused on stakeholders who want a lower net cost and improve patient affordability. That strategy is paying off, and we are building on our moment - Samson. Regarding the interchangeability status of Hadleema in the US, the designation was approved on the low concentration formulation for the pre-filled syringe and single-dose file presentations. Samson continues to navigate the approval of the other presentations, and we continue to expect to have interchangeability on those presentations in the middle of next year as planned, as pending FDA approval.

Kevin Ali: pointing to prescriber preferences for our product. From the first quarter to the second quarter, total prescriptions for HADLIMA grew over 60 percent, consistent with the TRX trend since launch.

Kevin Ali: We are having success because our strategy is focused on stakeholders who want to lower net costs and improve patient affordability. That strategy is paying off and we are building on our momentum.

Kevin Ali: Regarding the interchangeability status of HADLIMA in the U.S.,

Kevin Ali: The designation was approved on the low-concentration formulation for the pre-filled syringe and single-dose vial presentations.

Kevin Ali: Samsung continues to navigate the approval of the other presentations and we continue to expect to have interchangeability on those presentations in the middle of next year as planned as pending FDA approval.

Kevin Ali: On the pipeline side of things, our other partner, Shanghai-Henlius Biotech, already filed in the EU for the Denosamab biosimilar candidate we licensed in from them. And they plan to file in the US later this year. They anticipate making filings for Prutusamab biosimilar candidate later this year and in 2025. Organon will have exclusive global commercialization rights to these assets outside of mainland China, Hong Kong, Macau, and Taiwan regions.

Speaker Change: They anticipate making filings for pertuzumab by a similar candidate later this year and in 2025. Organon will have exclusive global commercialization rights to these assets outside of mainland China, Hong Kong, Macau, and Taiwan regions.

Kevin Ali: And then rounding out the discussion with the status brands, which declined 1% XFX in the second quarter and has grown 1% XFX year-to-date. So far in the first half of the year, the $40 million contribution from the recent commercialization agreement with Eli Lilly for the two migraine drugs led by Amgality are off to a good start. Also, the recovery in certain injectable steroid products following last year's market action has more than offset expected impacts from VBP, LOE, and mandatory price revisions in Japan. Performance in those products also compensated for unfavorable timing of shipments related to our ERP implementation, which was completed in April.

Speaker Change: So far, in the first half of the year, the $40 million contribution from the recent commercialization agreement with Eli Lilly for the two migraine drugs led by Imgality are off to a good start.

Speaker Change: Performance in those products also compensated for unfavorable timing of shipments related to our ERP implementation, which was completed in April .

Kevin Ali: The pushes and pulls on the established brand portfolio tend to be different in every quarter. But since the spin, we have shown that the diversity of our products, geographic span, and entrepreneurial focus leads to very steady results. Entrepreneurial focus encompasses business development opportunities like the migraine assets. We continue to look for those type of transactions where the assets are launch ready, complementary to our existing portfolio, and can enhance the overall growth profile of the company.

Speaker Change: Entrepreneurial focus encompasses business development opportunities like the migraine assets.

Kevin Ali: Moving now to slide six, where we take a look at revenue by geography. You can was down 1% XFX in the quarter, though this region benefited the most from the addition of the two migraine assets and the recovery of injectable steroids. It was also the region most affected by unfavorable phasing of sales related to the ERP implementation. The US was up 5% in the quarter driven by solid performance of Nexplanon as well as uptake of both Had Lima and Jada. These factors offset price pressure and the channel dynamics and fertility, as well as performance of Entrezont and Renflexis, which are in decline after more than five years on the market in the US.

Speaker Change: The U.S. was up 5% in the quarter driven by solid performance of Nexplanon as well as uptake of both Hadalima and Jada.

Speaker Change: These factors offset price pressure and the channel dynamics and fertility, as well as performance of Entrezant and Renflexus, which are in decline after more than five years on the market in the U.S.

Kevin Ali: The APJ region was up 5% XFX in the quarter, mostly due to the recovery of injectable steroids and some favorable timing in Singular. We expected to be a challenging year in Japan as we faced national price revisions for some products and work through L.O.E.s of out of that and roses that in that market. The Lamara region, which has been a significant contributor to organons growth since the spin, had 8% XFX growth in the second quarter, which was primarily driven by volume associated with the Entrezont tender in Brazil, as well as strong growth in Nexplanon across certain access markets.

Speaker Change: The APJ region was up 5% to XFX in the quarter, mostly due to the recovery of injectable steroids and some favorable timing in Singular.

Speaker Change: The La Mera region, which has been a significant contributor to Organon's growth since the spin, had 8% XFX growth in the second quarter, which was primarily driven by volume associated with the Entrezon tender in Brazil, as well as strong growth in Nexplanon across certain access markets and Mexico.

Kevin Ali: and Mexico. China was down 4% except X in the quarter, but we expect the second half of the year to be stronger than the first, driven by fertility and the continuous performance in the retail and hospital channels.

Kevin Ali: Overall, we're very pleased with the results of the first half of the year, and we feel confident in our ability to deliver our third consecutive year of constant currency revenue growth in 2024 and higher year-over-year adjusted EBITDA. EBITDA growth underpins strong cash flow, which accelerates our ability to deliver and to play offense when it comes to executing on business development and driving revenue growth. So optimizing our cost structure and implementing efficiency initiatives across the enterprise is ever critical in creating shareholder value.

Speaker Change: Overall, we're very pleased with the results of the first half of the year and we feel confident in our ability to deliver our third consecutive year of constant currency revenue growth in 2024 and higher year-over-year adjusted EBITDA.

Speaker Change: EBITDA growth underpins strong cash flow, which accelerates our ability to deliver and to play offense when it comes to executing on business development and driving revenue growth.

Matthew Walsh: Now let's turn the call over to Matt, who will go into our financial results in more detail.

Speaker Change: Now let's turn the call over to Matt, who will go into our financial results in more detail.

Matthew Walsh: Thank you, Kevin. Beginning on site 7, here we bridge revenue for the second quarter year over year. The biggest rider in the bridge is volume growth of $55 million, comprised of strength in the areas we've mentioned: biosimilars, Nexplanon, and the addition of Amgality. Combined with stronger volume growth in the first quarter, year-to-date revenue growth due to volume is solid at about 4.5% organic growth, which rises to about 6% including the addition of Amgality. The typical headwinds to revenue growth, which we show as the first three steps in the bridge, were all fairly light in the second quarter.

Matt: Thank you, Kevin. Beginning on slide seven, here we bridge revenue for the second quarter year over year.

Matt: The biggest driver in the bridge is volume growth of $55 million, comprised of strength in the areas we've mentioned, biosimilars, nexplanon, and the addition of mGalati.

Speaker Change: Combined with stronger volume growth in the first quarter, year-to-date revenue growth due to volume is solid at about 4.5% organic growth.

Speaker Change: which rises to about 6% including the addition of MGALITY.

Matthew Walsh: LOE was about $5 million of impact, which reflects the loss of exclusivity of Addosette in Japan. The impact of VBP in China was also about $5 million in the second quarter, which reflects lingering effects of round eight that began in the third quarter of last year and included Remoron and Hyzar. It was also an approximate $5 million impact from pricing the second quarter; overall, pretty negligible. The benefits of our Nexplanon pricing strategy in the US muted expected pricing pressure in other parts of our business, particularly in biosimilars, and to a lesser extent fertility. In supply other, here we capture the lower margin contract manufacturing arrangements that we have with Merck, in which have been declining since the spin-off, as expected.

Speaker Change: The impact of VBP in China was also about $5 million in the second quarter, which reflects lingering effects of Round 8 that began in the third quarter of last year and included Remeron and Hyzar.

Speaker Change: There was also an approximate $5 million impact from price in the second quarter, overall pretty negligible.

Speaker Change: The benefits of our Nexplanon pricing strategy in the U.S. muted expected pricing pressure in other parts of our business, particularly in biosimilars, and to a lesser extent, fertility.

Kevin Ali: In Supply Other, here we capture the lower margin contract manufacturing arrangements that we have with Merck and which have been declining since the spinoff, as expected.

Speaker Change: In Supply Other, here we capture the lower-margin contract manufacturing arrangements that we have with Merck, and which have been declining since the spin-off, as expected.

Matthew Walsh: And lastly, foreign exchange translation had an approximate $30 million impact or two percentage points of headwind to revenue, which reflects a strengthening dollar relative to the prior year.

Speaker Change: And lastly, foreign exchange translation had an approximate $30 million impact, or 2 percentage points of headwind to revenue, which reflects a strengthening dollar relative to prior year.

Matthew Walsh: Now let's turn to performance by franchise. As I've done in past quarters, I will target my comments over the next three slides to those areas most relevant to your modeling. Let's start with women's help on slide eight. Kevin already discussed in detail our expectations for Nexplanon. I'll add that achieving a growth rate of low teens for the full year would imply a lower but still very robust, mid-to-high single-digit growth rate for Nexplanon in the second half of this year. That is sensible considering that the very strong growth realized in the first quarter of this fiscal year benefited from lapping a significant buyout in the prior year period.

Speaker Change: Now let's turn to performance by franchise.

Speaker Change: As I've done in past quarters, I will target my comments over the next three slides to those areas most relevant to your modeling.

Speaker Change: Let's start with Women's Health on slide 8.

Speaker Change: Kevin already discussed in detail our expectations for Nexplanon. I'll add that achieving a growth rate of low teens for the full year would imply a lower, but still very robust, mid-to-high single-digit growth rate for Nexplanon in the second half of this year.

Speaker Change: That is sensible considering that the very strong growth realized in the first quarter of this fiscal year benefited from lapping a significant buyout in the prior year period.

Matthew Walsh: For fertility, as you phase your expectations for the second half, I remind you that the fourth quarter of 2024 will be a tough comparison since it was in the fourth quarter last year that we had the buy-in related to onboarding the new PVM customer and the interim operating model exit in the U.S. Globally, third quarter will be a stronger quarter for fertility compared with the fourth quarter. With regard to other key products within women's health, new varying was the most significant revenue offset in the quarter, and likely will continue to be in the near term, as that product now has five generic competitors in the U.S.

Speaker Change: For Fertility, as you phase your expectations for the second half, I remind you that the fourth quarter of 2024 will be a tough comparison since it was in the fourth quarter last year that we had the buy-in related to onboarding the new PBM customer and the interim operating model exit in the U.S.

Speaker Change: So globally, third quarter will be a stronger quarter for fertility compared with the fourth quarter.

Speaker Change: With regard to other key products within Women's Health, NuvaRing was the most significant revenue offset in the quarter and likely will continue to be in the near term as that product now has five generic competitors in the U.S.

Matthew Walsh: In lastly in women's health, it's worth noting the strong year-to-date performance in Marvellon Mercelon, up 13% XFX. Like the migraine assets, this re-acquisition of rights to the Marvellon and Mercelon assets in certain markets highlights areas of business development where we can leverage our global capabilities.

Speaker Change: And lastly, in women's health, it's worth noting the strong year-to-date performance in Marvalon Mersolon, up 13% XFX.

Speaker Change: Like the migraine assets, this reacquisition of rights to the Marvalon and Mersolon assets in certain markets highlights areas of business development where we can leverage our global capabilities.

Matthew Walsh: Turning to buy as similar as on slide 9, for head Lima, we expect U.S. revenues to grow sequentially every quarter this year. What isn't evident in the U.S. Revenue of $20 million in Q2 is a small one-time wholesale or inventory adjustment in Q1 to support the onboarding of the VA contract that we want. Excluding this inventory adjustment, U.S. High Lima growth would have been about 20% sequentially from Q1 to Q2. The low teens, constant currency growth at Kevin reference for the full year for our global biosimulates franchise will be driven by strong growth in head Lima that we expect will offset expected pressure and on-trison, particularly in the U.S.

Speaker Change: Turning to biosimilars on slide 9.

Speaker Change: For HEDLIMA, we expect U.S. revenues to grow sequentially every quarter this year. What isn't evident in the U.S. revenue of $20 million in Q2 is a small one-time wholesaler inventory adjustment in Q1 to support the onboarding of the VA contract that we won.

Speaker Change: Excluding this inventory adjustment, U.S.-led Lima growth would have been about 20% sequentially from Q1 to Q2.

Speaker Change: The low teens, constant currency growth that Kevin referenced for the full year for our global biosimilars franchise will be driven by strong growth in HEDLIMA that we expect will offset expected pressure in Entrezant, particularly in the U.S. and Europe .

Matthew Walsh: and Europe. Renflexis should also be a moderate contributor to the franchise for the full year, helped by good performance in Canada that has the potential to offset price pressure in Renflexis in the U.S. Turning to slide 10, if we think about the 1% year-to-date revenue growth in established brands during the first half of the year, across the franchise, that was driven by 1% volume growth that offset very negligible pricing impact. Year-to-date revenue drivers like DBP, L.O.E. and Price have all had minimal impact on established brand's performances, we said earlier. In the back half of the year, we will see more prominent impact, and we're mainly focused on three drivers.

Speaker Change: Renflexus should also be a moderate contributor to the franchise for the full year, helped by good performance in Canada that has the potential to offset price pressure in Renflexus in the U.S.

Speaker Change: Turn to slide 10. If we think about the 1% year-to-date revenue growth in established brands during the first half of the year, across the franchise, that was driven by 1% volume growth that offset very negligible pricing impacts.

Speaker Change: Year-to-date, revenue drivers like VBP, LOE, and price have all had minimal impact on established brands' performance, as we said earlier.

Speaker Change: In the back half of the year, we will see more prominent impact, and we're mainly focused on three drivers. First, the impact from VBP and China will pick up, driven by FOSAMAX's inclusion in round 10, expected late in the fourth quarter.

Matthew Walsh: First, the impact from VBP in China will pick up, driven by FOSIMax's inclusion in Round 10, expected late in the fourth quarter. Second, L.O.E. impact will be more significant as out of that we'll go through L.O.E. in the EU in September of this year. And third, price will be more of a headwind as we expect the impacts from mandatory pricing revisions in Japan to accelerate. We do expect strength and volume growth in the second half of the year in the established brand's portfolio coming from continued onboarding of the migraine products, which we initiated during the first quarter of this year.

Speaker Change: Second, LOE impact will be more significant as Adozet will go through LOE in the EU in September of this year.

Speaker Change: And third, price will be more of a headwind as we expect the impacts from mandatory pricing revisions in Japan to accelerate.

Speaker Change: We do expect strength and volume growth in the second half of the year in the established brands portfolio coming from continued onboarding of the migraine products which we initiated during the first quarter of this year.

Matthew Walsh: Additionally, when Kevin spoke about our performance in established brands, especially You Can, he noted the phasing of shipments related to the implementation of our ERP system. Those impacts are largely contained in our first half performance, and we have put that behind us. For the full year, we continue to expect established brands to achieve flat performance except X.

Speaker Change: Additionally, when Kevin spoke about our performance in established brands, especially UCAN, he noted the phasing of shipments related to the implementation of our ERP system.

Kevin Ali: Those impacts are largely contained in our first half performance, and we have put that behind us.

Speaker Change: For the full year, we continue to expect established brands to achieve flat performance XFX.

Matthew Walsh: Now let's turn to slide 11, where we show key non-GAAP P&L line items and metrics for the second quarter. For reference, gap financials and reconciliation to the non-GAAP financial measures are included in our press release and the slides Foundation. For Gross Profit, we are excluding from cost of goods sold, purchase accounting amortization, and one-time item is related to the spin-off which can be seen in our appendix slide. A gestic gross margin was 62% in the second quarter of 2024, compared with 62.9% in the second quarter of 2023. In the second quarter of 2024, as with the first quarter, the lower adjusted gross margin was primarily related to unfavorable product mix, foreign exchange translation, and higher inflation impacts to material and distribution costs.

Speaker Change: Now let's turn to slide 11, where we show key non-GAAP P&L line items and metrics for the second quarter. For reference, GAAP financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation.

Speaker Change: For gross profit, we are excluding from cost of goods sold, purchase accounting amortization, and one-time items related to the spinoff, which can be seen in our appendix slide.

Speaker Change: Adjusted gross margin was 62% in the second quarter of 2024 compared with 62.9% in the second quarter of 2023.

Speaker Change: In the second quarter of 2024, as with the first quarter, the lower adjusted gross margin was primarily related to unfavorable product mix, foreign exchange translation, and higher inflation impacts to material and distribution costs.

Matthew Walsh: Excluding $15 million of IPR and D expense incurred during the period, non-GAAP operating expenses were down 2% year over year. This is a reflection of our cost containment efforts and also favorable timing of spend. Of the $15 million of IPR and D expense in the second quarter, $10 million was related to our collaboration with Circle in on-demand non-hormonal contraception, and $5 million was related to our collaboration with Shanghai Henlius for further advancement of a denosimab biosimilar. Milestone payments are inherently difficult to forecast, so we will continue to utilize the same guidance convention that we initiated in late 2023, which is to include an estimate of IPR and D in milestones to be recorded in the quarter in our earnings date press release, which will be posted as soon as practical after the close of each quarter.

Speaker Change: Excluding $15 million of IPR&D expense incurred during the period, non-GAAP operating expenses were down 2% year-over-year.

Speaker Change: This is a reflection of our cost containment efforts and also favorable timing of spend.

Speaker Change: Of the $15 million of IPR&D expense in the second quarter, $10 million was related to our collaboration with Circle in on-demand non-hormonal contraception, and $5 million was related to our collaboration with Shanghai Henleus for further advancement of a denosumab biosimilar.

Speaker Change: Milestone payments are inherently difficult to forecast, so we will continue to utilize the same guidance convention that we initiated in late 2023, which is to include an estimate of IPR&D and milestones to be recorded in the quarter in our earnings date press release.

Speaker Change: which will be posted as soon as practical after the close of each quarter.

Matthew Walsh: These factors culminated in an adjusted even a margin of 31.9% in the second quarter of 2024 compared with 33% in the second quarter of 2023. Non-GAAP adjusted net income was $289 million, or $1.12 per diluted share compared with $336 million, or $1.31 per diluted share in 2023.

Speaker Change: These factors culminated in an adjusted even margin of 31.9% in the second quarter of 2024 compared with 33% in the second quarter of 2023.

Speaker Change: Non-GAAP-adjusted net income was $289 million, or $1.12 per diluted share, compared with $336 million, or $1.31 per diluted share in 2023.

Matthew Walsh: During slide 12, we provide a closer look at our cash flow for the first half of the year. In 2022 and 2023, our two full fiscal years post-spin off, we generated a significant majority of our free cash flow in the back half of those years. This year, we're on track to deliver more balanced phasing of free cash flow between the first half and second half. In part, this is driven by timing, as our full year expectation of approximately $1 billion in free cash flow before one-time items remains unchanged. With our single instance, globally, our piece is now completely in place as of April.

Speaker Change: During slide 12, we provide a closer look at our cash flow for the first half of the year.

Speaker Change: In 2022 and 2023, our two full fiscal years post-spinoff, we generated a significant majority of our free cash flow in the back half of those years.

Speaker Change: This year, we're on track to deliver more balanced phasing of free cash flow between first half and second half.

Speaker Change: In part, this is driven by timing, as our full-year expectation of approximately $1 billion in free cash flow before one-time items remains unchanged.

Matthew Walsh: We are working to optimize business processes around cash cycle working capital, which will help stabilize free cash flow generation. And of course, one-time spin-related cash costs, $117 million in the first half, will be declining meaningfully in the second half, and we expect to finish the year at a figure just north of $200 million, or roughly a 40% decline relative to 2023. Next year, we would expect one-time spin-related costs to be diminished. In the $70 million of other one-time costs, here we capture headcount restructuring initiatives and manufacturing decentralization. These network optimization costs are distinct from the spin-related costs and that they're associated with actions to separate our manufacturing and supply chain activities through exits of supply agreements with Merck, which will ultimately drive cost efficiency.

Speaker Change: With our single instance global ERP system now completely in place as of April , we are working to optimize business processes around cash cycle working capital, which will help stabilize free cash flow generation, and of course, one-time spin related cash costs.

Speaker Change: $117 million in the first half, will be declining meaningfully in the second half, and we expect to finish the year at a figure just north of $200 million, or roughly a 40% decline relative to 2023.

Speaker Change: Next year, we would expect one-time spin-related costs to be de minimis.

Speaker Change: In the $70 million of other one-time costs, here we capture headcount restructuring initiatives and manufacturing network optimization.

Speaker Change: These network optimization costs are distinct from the spin-related costs in that they're associated with actions to separate our manufacturing and supply chain activities through exits of supply agreements with Merck, which will ultimately drive cost efficiency.

Matthew Walsh: Slide 13. Our net leverage ratio has remained level with 2023 year end and is holding it 4.1 times. This is a favorable development versus our expectation at the start of the year. When we believed we would see leverage tick higher in the first half before coming down. Given our adjusted EBITDA guidance for the year, we continue to see an achievable path to ending the year with a net leverage ratio below 4 times.

Speaker Change: Slide 13, our net leverage ratio has remained level with 2023 year-end and is holding at 4.1 times.

Speaker Change: This is a favorable development versus our expectation at the start of the year, when we believed we would see leverage tick higher in the first half before coming down.

Speaker Change: Given our adjusted EBITDA guidance for the year, we continue to see an achievable path to ending the year with a net leverage ratio below four times.

Matthew Walsh: Now turning to 2024 guidance on slide 14, where we highlight the items driving our 2024 revenue guidance range. As Kevin mentioned, we have tightened our revenue range around the midpoint, where showing a slightly different version of this graph compared with prior quarters to illustrate the acceleration of driver activity in the second half or relative to the first half. The first takeaway from this slide is that there are only minor tweaks to the ranges for each of the drivers, all netting to a consistent view of operational performance relative to our previous guidance communication. The midpoint of our revenue guide on a nominal basis remains unchanged at 1.4% growth, and the midpoint of our revenue guide on a constant currency basis remains unchanged at 3.4% growth.

Speaker Change: Now turning to 2024 guidance on slide 14, where we highlight the items driving our 2024 revenue guidance range.

Speaker Change: As Kevin mentioned, we have tightened our revenue range around the midpoint.

Kevin Ali: We're showing a slightly different version of this graph compared with prior quarters to illustrate the acceleration of driver activity in the second half relative to the first half.

Speaker Change: The first takeaway from this slide is that there are only minor tweaks to the ranges for each of the drivers, all netting to a consistent view of operational performance relative to our previous guidance communication.

Speaker Change: The midpoint of our revenue guide on a nominal basis remains unchanged at 1.4% growth, and the midpoint of our revenue guide on a constant currency basis remains unchanged at 3.4% growth.

Matthew Walsh: The objective in showing the numbers this way is that when we bifurcate the bars to show first half versus the expected impact in the second half, you can see the point we made earlier that LOE, VBP, and price were all negligible drivers year to date, but their respective impacts will pick up in the second half. Importantly, you can see that we expect second half volume growth to more than offset the collective impact of the other drivers. For LOE, that approximate 70 million to 90 million dollar range reflects LOE of asset in Japan, which is already underway, and also the LOE's of asset in the EU, which will occur in September, and to a lesser extent, rose asset in Japan, which will also occur later in the year.

Speaker Change: The objective in showing the numbers this way is that when we bifurcate the bars to show first half versus the expected impact in the second half,

Speaker Change: You can see the point we made earlier that LOE, VVP, and Price were all negligible drivers year-to-date, but their respective impacts will pick up in the second half.

Speaker Change: Importantly, you can see that we expect second half volume growth to more than offset the collective impact of the other drivers.

Speaker Change: For LOE, that approximate $70 million to $90 million range reflects LOE of ADIZET in Japan, which is already underway, and also the LOEs of ADIZET in the EU, which will occur in September , and to a lesser extent ROSIZET in Japan, which will also occur later in the year.

Matthew Walsh: VBP impact is still expected to be in the range of 30 million to 50 million dollars for full year 2024, which will be back half-weighted to reflect FOSOMAS' expected inclusion in round 10, late in the year, as I mentioned. Our range on expected impact from price improves very modestly as we take the high end of the range down by 20 million dollars. The revised range of 180 million to 200 million dollars represents an approximate 3 percentage point headwind versus prior year and is in line with our longer term expectations from price impact across the entire business.

Speaker Change: VBP impact is still expected to be in the range of $30 million to $50 million for full year 2024, which will be back half-weighted to reflect FOSAMAX's expected inclusion in round 10 late in the year, as I mentioned.

Speaker Change: Our range on expected impact from price improves very modestly as we take the high end of the range down by $20 million.

Matthew Walsh: Year-to-date impact from pricing has been minimal. Mostly due to the changes we've made in the next plan on pricing strategy, along with work across the established branch franchise to minimize the mandatory pricing revisions we expect to see in certain international markets. Marcus. Impact from price will be felt more acutely in the back half as the mandatory pricing revisions in Japan accelerate. There will also be mandatory price reduction associated with the adazit LOE in the EU. And finally, the competitive dynamics and fertility and biosimilars also pressure price. For the year, we've narrowed the range on volume to 500 million to 600 million dollars, with no change to the midpoint.

Speaker Change: Year to date, impact from pricing has been minimal, mostly due to the changes we've made in Nexplanon's pricing strategy, along with work across the Established Brands franchise to minimize the mandatory pricing revisions we expect to see in certain international markets.

Speaker Change: Impact from price will be felt more acutely in the back half as the mandatory pricing revisions in Japan accelerate.

Speaker Change: There will also be mandatory price reductions associated with the Adazet LOE in the EU. And finally, the Competitive Dynamics in Fertility and Biosimilars also pressure price.

Speaker Change: For the year, we've narrowed the range on volume to $500 million to $600 million with no change to the midpoint.

Matthew Walsh: The range for volume reflects an approximate 9% growth rate over last year. In the first half of the year, volume growth was strong at 6%, but second half volume growth is expected to be even stronger, about double that actually, with the inflection primarily driven by assets that are new to the portfolio since the spin. US head Lima and Galady, Marvel on Mercelon and the additional markets are required, as well as Jada. We'll also benefit from geographic footprint expansion and fertility. And finally, based on the continued strength in the US dollar using recent spot rates, we upped our range slightly on our view of the impact from FX to 110 million to 140 million dollars.

Speaker Change: The range for volume reflects an approximate 9% growth rate over last year.

Speaker Change: In the first half of the year, volume growth was strong at 6%, but second half volume growth is expected to be even stronger, about double that actually, with the inflection primarily driven by assets that are new to the portfolio since the spin.

Speaker Change: U.S. Head Lima and Gality, Marvellon-Mersillon and the additional markets reacquired, as well as Jada.

Speaker Change: We'll also benefit from geographic footprint expansion and fertility.

Speaker Change: And finally, based on the continued strength in the U.S. dollar using recent spot rates, we upped our range slightly on our view of the impact from FX to $110 million to $140 million.

Matthew Walsh: Moving to the other components of guidance now on slide 15. For adjusted gross margin, we are continuing to guide to a range of 61 to 63 percent for 2024. Year-to-date gross margin with 62 percent, just right in the middle of our range, and feels like a pretty good barometer for second half and therefore full year. On SGNA expense, year-to-date we've been tracking on the low end of our $1.5 billion to $1.7 billion range, but that's really just timing. We expect SGNA spend to pick up in the second half of the year, tied to planned investment in product launches, the migraine products, for example, as well as next Planon.

Speaker Change: Moving to the other components of guidance now on slide 15.

Speaker Change: For adjusted gross margin, we are continuing to guide to a range of 61 to 63% for 2024.

Speaker Change: Year-to-date gross margin was 62%, just right in the middle of our range, and feels like a pretty good barometer for second half, and therefore full year.

Speaker Change: On SG&A expense, year-to-date we've been tracking on the low end of our $1.5 billion to $1.7 billion range, but that's really just timing.

Speaker Change: We expect SG&A spend to pick up in the second half of the year, tied to planned investment in product launches, the migraine products, for example, as well as Nexplanon.

Matthew Walsh: To provide a guidepost, we expect non-GAP SGNA expense to grow in the mid-single digits in the second half of the year, compared with the second half of last year. For R&D, all we did here was raise the range by the $30 million of IPR&D incurred year-to-date. Operationally, we're tracking close to the midpoint of that $400 million to $500 million range x IPR&D that we set at the beginning of the year. It's worth noting that, to this point, we've been able to absorb the year-to-date IPR&D expense within our adjusted even a margin range of 31 to 33 percent for the full year.

Speaker Change: To provide a guidepost, we expect non-GAAP SG&A expense to grow in the mid-single digits in the second half of the year compared with the second half of last year.

Speaker Change: For R&D, all we did here was raise the range by the $30 million of IP R&D incurred year-to-date. Operationally, we're tracking close to the midpoint of that $400 million to $500 million range ex-IP R&D that we set at the beginning of the year.

Speaker Change: It's worth noting that to this point, we've been able to absorb the year-to-date IPR&D expense within our adjusted EBITDA margin range of 31 to 33 percent for the full year.

Matthew Walsh: The $30 million of expense was worth about one percentage point of adjusted even a margin year-to-date. As you think about quarterly phasing, at this point in time, we believe that Q3 and Q4 should be fairly similar with regard to absolute revenue dollars and even a margin. For below the line items, there's no change to ranges for interest, taxes, or depreciation. Year-to-date, we're running a bit favorable relative to our non-GAAP income tax rate guide. Our non-GAAP effective tax rate in the second quarter was 17.3 percent and is 16 percent year-to-date. The 2024 year-to-date non-GAAP ETR was favorably impacted by the conclusion of two non-U.S.

Speaker Change: The $30 million of expense was worth about 1 percentage point of adjusted EBITDA margin year-to-date.

Speaker Change: As you think about quarterly phasing, at this point in time, we believe that Q3 and Q4 should be fairly similar with regard to absolute revenue dollars and even a margin.

Speaker Change: For below-the-line items, there's no change to ranges for interest, taxes, or depreciation.

Speaker Change: Year-to-date, we're running a bit favorable relative to our non-GAAP income tax rate guide. Our non-GAAP effective tax rate in the second quarter was 17.3 percent and is 16 percent year-to-date.

Speaker Change: The 2024 year-to-date non-GAF ETR was favorably impacted by the conclusion of two non-U.S. tax audits.

Matthew Walsh: taxes. Maxoids. For the full year 2024, we continue to view 18.5% to 20.5% as a good range. Despite our debt refinancing in May, we didn't change our point estimate of approximately $520 million for annual interest expense because the sum of the accelerated amortization of previously capitalized financing costs and financing fees for the new instruments expense in the current period is substantially offset by the lower interest rate on the new instruments.

Speaker Change: For the full year 2024, we continue to view 18.5% to 20.5% as a good range.

Speaker Change: Despite our debt refinancing in May, we didn't change our point estimate of approximately $520 million for annual interest expense.

Speaker Change: Because the sum of the accelerated amortization of previously capitalized financing costs and financing fees for the new instruments expensed in the current period is substantially offset by the lower interest rate on the new instruments.

Matthew Walsh: Summing up, Q2 was another solid quarter performance that continues the strong results posted in the first quarter. We're heading in the right direction on volume growth, margins, operating expense discipline, and free cash flow. We are tracking to another year of constant currency revenue growth consistent with our expectations for the year.

Speaker Change: Summing up, Q2 was another solid quarter of performance that continues the strong results posted in the first quarter. We're heading in the right direction on volume growth, margins, operating expense discipline, and free cash flow.

Speaker Change: We are tracking to another year of constant currency revenue growth, consistent with our expectations for the year.

Operator: With that, now let's turn the call over to questions and answers. Thank you. We will now begin the question and answer session. If you've dulled in and would like to ask the question, please press star one on your telephone keypad, raise your hand, and join the queue. If you'd like to withdraw your question, simply press star one again. If you're called upon to ask your question, there will seem via loudspeaker on your device. Please pick up your handset, and the short of your phone is not a mute when asking your question.

Speaker Change: With that, now let's turn the call over to questions and answers.

Speaker Change: Thank you. We will now begin the question and answer session. If you dialed in and would like to ask a question, please press star 1 on your telephone keypad, raise your hand, and join the queue. If you'd like to withdraw your question, simply press star 1 again.

Speaker Change: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Operator: We ask for today's session that you please limit yourself to one question and one follow-up question. Again, press star one to join the queue.

Speaker Change: We ask for today's session that you please limit yourself to one question and one follow-up question.

Speaker Change: Again, press star 1 to join the queue.

Umer Raffat: Our first question comes from the line of Umar Rafat with Evercore ISI. Please go ahead. Good morning, guys. Thanks for taking my question. I'm sure you've seen some of the headlines on Gartacell last week. So I have two questions off of that. Number one is Moorfah. History question, if I may.

Speaker Change: Our first question comes from the line of Umer Raffat with Evercore ISI. Please go ahead.

Umar Rafat: Morning guys, thanks for taking my question. I'm sure you've seen some of the headlines on Gardasil last week, so I have two questions off of that. Number one,

Kevin Ali: So during your time at Mark, obviously there was a decision made to sell Gartacell to a local partner, but all the Organone products were sold directly in China. Could you speak to why the commercial strategy was different and if you would expect a different outcome if you had a local partner or not? And secondly, I remember last year when you had an 11% down in 3Q, you talked about health care budget deficit in China for the first time, as well as stricter and reinforcement of the procurement rule and investigations. So would that, or would that not affect the man?

Speaker Change: It's more of a history question, if I may. So during your time at Merck, obviously there was a decision made.

Speaker Change: to sell Gardasil to a local partner, but all the Organon products were sold directly.

Speaker Change: In China, could you speak to why the commercial strategy was different and if you would expect a different outcome if you had a local partner or not?

Speaker Change: And secondly, I remember last year when you had an 11% down in 3Q, you talked about healthcare budget deficit in China for the first time, as well as stricter enforcement of the procurement rules and investigations.

Kevin Ali: It doesn't look like it's affecting your demand, but could you speak to that dynamic? Thank you very much. Thank you, Mark. Just Kevin. Thanks for the question. Let me start with your last question first. If I just kind of put it in perspective, let me just kind of narrow down on Q2. Our Q2 results kind of were impacted with a very high comparator in Q2 of 23, based on kind of a COVID rebound. And so that drove significant sales last year, for example, fertility. Also, we're washing through the Round 8 VBP impact in Q3 of '23.

Speaker Change: So, would that or would that not affect demand? It doesn't look like it's affecting your demand, but could you speak to that dynamic? Thank you very much.

Speaker Change: Hey Umer, it's Kevin. Thanks for the thanks for the question. Let me start with your last question first.

Speaker Change: If I just kind of put it in perspective, let me just kind of narrow down on Q2. Our Q2 results in China were...

Speaker Change: Impacted with a very high comparator in Q2 of 23.

Speaker Change: based on a kind of a COVID rebound, and so that drove significant sales last year for, for example, fertility. Also, we're watching through the round eight VBT impact in Q3 of 23. But we're seeing some really positive tailwinds to your point.

Kevin Ali: But we're seeing some really positive tailwinds to your point on the status brands in the hospital sector. We see strengths, post VBP, as well for retail. We've had the third consecutive quarter sequential growth. But we're washing through a number of those things that I've just mentioned earlier. What I do see going forward, again to your point, is that we see the second half of the year returning to what I would consider mid-single-digit growth for China. So I don't see anything there that ultimately tells me that we're going to have any type of continuation of down draft.

Speaker Change: on on established brands. In the hospital sector, we see strength post VVP, as well for retail. We've had the third consecutive quarter sequential growth.

Speaker Change: But we're washing through a number of those things that I've just mentioned earlier. What I do see going forward...

Speaker Change: Again, to your point is that we see the second half of the year returning to what I would consider mid-single-digit growth for China.

Speaker Change: So, I don't see anything there that ultimately tells me that we're going to have any type of continuation of downdraft. I think we're going to be in good shape for the year, but I've always basically said, when we finish this year, 80% of our business

Kevin Ali: I think we're going to be in good shape for the year. But I've always been basically said, when we finish this year, 80% of our business, established brand business will have gone through the VBP. So next year we expect to have finally back to kind of what I would consider solid growth momentum for China going forward based on a number of different aspects.

Speaker Change: Established Brands Business will have gone through the VBP, so next year we expect to have finally back to kind of what I would consider solid growth momentum for China going forward, based on a number of different aspects.

Kevin Ali: In regards to your first question, yeah, I was in charge of the international segment for Merck, but we don't have necessarily the partner relationship that Merck does in China, so we don't have that type of exposure. So that's kind of the way I would signal to you that we don't have any issues there in regards to local partnerships that potentially could affect our forecasting. And Kevin, also, would there not be any inventory dynamics either? Because I know part of the issue on Gardasil is local CDC is not buying as much. So I wondered, could there be any hospital inventory, anything like that?

Speaker Change: In regards to your first question, yeah, I was in charge of the international segment for Merck, but...

Speaker Change: You know, we don't have necessarily the partner relationship that Merck does.

Speaker Change: in China, so we don't have that type of exposure. So that's kind of the way I would signal to you that we don't have any issues there in regards to local partnerships that potentially could affect our forecasting opportunities.

Speaker Change: and Kevin also would there not be any inventory dynamics either because I know part of the issue on Gardasil is local CDC is not buying as much so I wondered could there be any hospital inventory anything like that which may be getting drafted down is there nothing like that

Kevin Ali: Which may be getting drafted down? Is there nothing like that? Where are inventories are locally? Got it. And at the hospital acquiring channel as well, correct? The inventory? Yes.

Speaker Change: For us, at least, our inventory is at a healthy level. It's not anything that I would consider to be too high or too low. It's basically within line of what we've always had. So that's what I would signal to you in terms of where our inventories are locally.

Speaker Change: Got it. And at the Hospital Acquiring Channel as well, correct? The inventory? Yes. Yes, both.

Umer Raffat: Thank you very much.

Ethan Brown: Our next question comes from the line of Chris Schott with JP Morgan. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: [inaudible]

Speaker Change: Our next question comes from the line of Chris Schott with J.P. Morgan. Please go ahead.

Ethan Brown: Hi, this is Ethan Brown on for Chris Schott. Thanks for taking our questions. Can you just give us a sense of how you see operating margins progressing through the rest of 2024 and into 2025? And just directionally, do you expect you'll be able to increase margins from here, or is the guidance range today a good proxy for margins over the next couple of years? Thank you. Thank you for the question. Yeah, we see operating margins fairly stable through the rest of the year, where we're making sure that our full year guidance has enough recognition, as we showed on slide 14 of the deck that we expect some amplitude.

Speaker Change: Hi, this is Ethan Brown on for Chris Schott. Thanks for taking our questions.

Chris Schott: Can you just give us a sense of how you see operating margins?

Speaker Change: Progressing through the rest of 2024 and into 2025, just directionally, do you expect you'll be able to increase margins from here, or is the guidance range today a good proxy for margins over the next couple of years? Thank you.

Speaker Change: Thank you for the question. Yeah, we see operating margins.

Speaker Change: fairly stable through the through the rest of the year where we're making sure that our full year guidance has enough recognition as we as we showed on slide 14 of the deck that we expect some amplitude more in the second half.

Matthew Walsh: More in the second half on things like L O E B B P and price than we did in the first half. But you know, we feel very good about what we're signaling in the guidance about our operating margins. A little bit too soon to talk to 2025. But we certainly see the continuation of the volume growth that we've been talking about in our key drivers. And yeah, more, more, more on 2025 when we get a little bit later, later in the year. Thanks so much.

Speaker Change: on things like LOE, VBP, and price than we did in the first half.

Speaker Change: But, you know, we feel very good about what we're signaling in the guidance about our operating margins. It's a little bit too soon to talk to 2025.

Speaker Change: But we certainly see the continuation of the volume growth that we've been talking about in our key drivers and yeah, more, more, more on 2025 when we get a little bit later, later in the year.

Ethan Brown: That's all for me.

David Amsellem: Our next question comes from a line of David Ampsilum with Piper Sandler. Please go ahead. Hey, thanks. So just a couple for me.

Speaker Change: Thanks so much. That's all from me.

Speaker Change: Our next question comes from the line of David Amsellem with Piper Sandler. Please go ahead.

David Amsellem: One, can you talk about your longer term contracting strategy on Headly and how you're thinking about tackling the payer landscape, you know, in the particular in the context of you know, that's kind of as recent execution on there on their significant contract. I mean, how do you think about that and help us better understand, you know, how you drive more volumes in that market? That's number one. And number two is just on the R and D spend. Wanted to get your sense philosophically for, you know, how you're thinking about it long term. I know there was a change in the guidance is mostly on the in process R and D, but I guess the larger point is, you know, when we're going to get more visibility on the pipeline and how are you prioritizing balancing overall pipeline spend versus, you know, margin stability or expansion.

David Amsalam: Hey, thanks. So just a couple for me.

Speaker Change: Can you talk about your longer-term contracting strategy on Hedlina and how you're thinking about...

Speaker Change: tackling the payer landscape, you know, in the, particularly in the context of

Speaker Change: You know, Teva's recent execution on...

Speaker Change: on their significant contract. I mean, how do you think about that and help us better understand, you know, how you drive more volumes in that market? That's number one. And number two is just on the R&D spend. I wanted to get your sense philosophically for, you know, how...

Speaker Change: I know there was a change in the guidance on the in-process R&D, but I guess the larger point is, when are we going to get more visibility on the pipeline and how are you prioritizing balancing overall pipeline spend versus margin stability or expansion?

Kevin Ali: Thanks. Thanks to the question, David. In regards to the first question regarding Had Lima going forward, I think we've always been very clear about our strategy. It's providing a really high quality, frictionless experience in terms of product to product comparison between the comparator of Humira and had Lima at the lowest net cost tool to give the affordability so as many patients possibly can take the product as possible. And so with that, I've always signaled that about 45% of the market today is what I would call it part of that low net cost segment. The rest is essentially made up of the PBMs; around 55% is PBM driven.

Speaker Change: Thanks for the question, David. In regards to the first question regarding HADLIMA going forward, I think we've always been very clear about our strategy.

Speaker Change: It's providing a really high-quality, frictionless experience in terms of product-to-product comparison between the comparator of Humira and HADLIMA at the lowest net cost to give the affordability so as many patients possibly can take the product as they need.

Speaker Change: As possible. And so with that, I've always signaled that about 45% of the market today is what I would call it part of that low net cost segment.

Speaker Change: The rest is essentially made up of the PBMs, around 55% is PBM driven.

Kevin Ali: And right now that's where we're getting our growth. You know, we are growing in TRX is about 60% quarter to over quarter one. And you can see that playing out. And I've always signaled that will be in the top two or three biosimilars for Humira when it's all said and done. I think that's essentially where you want to be. Over time, and we're seeing good solid growth, as you've seen with our numbers. And we continue to see that going forward as well.

Speaker Change: And right now, that's where we're getting our growth. You know, we are growing, and TRX is about 60%, quarter two over quarter one, and you can see that.

Speaker Change: playing out. And I've always signaled that we'll be in the top two or three biosimilars for Humira when it's all said and done. I think that's essentially where you want to be over time. And we're seeing good, solid growth, as you've seen with our numbers, and we continue to see that going forward as well.

Kevin Ali: In regards to R&D, I think that's a function of the fact of what we have right now. We're very excited about what we've got in the pipeline 6219, which is our endometriosis asset will hopefully be reporting out this time next year in terms of our phase 2a2b data. And in regards to the future, I think we're being very prudent in regards to how we use our capitals, whether it's, you know, deals like we do with Lily and these tuck-in deals, which we think is very prudent. Or whether we see something that kind of is coming down the pipe that we think is really, really exciting.

Speaker Change: In regards to R&D, I think that's a function of the fact of what we have right now. We're very excited about what we've got in the pipeline, 6.2.1.9, which is our endometriosis asset. We'll hopefully be reporting out this time next year in terms of our Phase 2a, 2b data.

Speaker Change: And in regards to the future, I think we're being very prudent in regards to how we use our capitals.

Speaker Change: whether it's, you know, deals like we do with Lilly and these tuck-in deals, which we think is very prudent, or whether we see something that kind of is coming down the pike that we think are really, really exciting. And there's more and more access, or rather more and more interest right now in terms of the women's health field. There's a lot of activity. There's a lot of R&D going in that space, but it is a long-term journey.

Kevin Ali: And there's more and more access, rather more and more interest right now in terms of the women's health field. There's a lot of activity. There's a lot of R&D going in that space, but it is a long-term journey, which we will be able to dedicate when we start to see things that are really the very interesting for us. In the meantime, I think that we're going to be able to do a lot of things that we're going to do. And we're going to do a lot of things that we're going to do. In the meantime, we do a lot of these what we consider tuck-ins, which are really good hygiene.

Speaker Change: of which we'll be able to dedicate when we start to see things that are really very interesting for us. In the meantime, we do a lot of what we consider tuck-ins, which are really good hygiene. Just look at the lily deal. That's really been very, very profitable for us just in the first few months.

Kevin Ali: Just look at the Lily deal. That's really been very, very possible for us just in the first few months. We'll continue to do those. And we'll be very de-gicious. We'll be very careful in terms of what we're going to do in regards to our R&D expenditures going forward.

Speaker Change: We'll continue to do those and we'll be very careful in terms of what we're going to do in regards to our R&D expenditures going forward.

Jason Gerberry: Thank you. Our next question comes from a line of Jason Gerberi with Bank of America. Please go ahead. Thank you, morning guys. Thanks for taking my questions.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Jason Gerberry with Bank of America. Please go ahead.

Jason Gerberry: So first one for me is just on EBITDA beyond 2024, not looking for guidance, but just directionally. You know, your thoughts on being able to either hold the cost structure flat or keep it down, you know, in 25 or 26. And the ability to do these amgality type of deals, what I say one per year. Just thinking about some of the TI1s to 2024, and then how we think about that going forward.

Jason Gerberry: Hey, good morning, guys. Thanks for taking my questions.

Jason Gerberry: So first one for me is just on EBITDA beyond 2024.

Jason Gerberry: Not looking for guidance, but just directionally, you know, your thoughts on being able to either hold the cost structure flat or keep it down, you know, in 25 or 26 and the ability to do these MGALITY type of deals.

Speaker Change: I'd say one per year, just thinking about some of the tailwinds to 2024, and then how we think about that going forward. And then my follow-up question on HADLIMA is, does interchangeability at this point on high concentrate matter?

Kevin Ali: And then my follow-up question on head Lima is this interchangeability at this point on high-concentrate matter at all in your view in any thoughts on ability to participate in from the private sector. Thank you.

Speaker Change: at all in your view and any thoughts on ability to participate.

Kevin Ali: Jason, I'll take the last question first, and I'll hand it over to Matt to discuss the EBITDA question. So, in regards to interchangeability, right now, you know, Samsung's been able to get the designation, which was approved for the low concentration pre-films to range in the single-dose vial presentations. But to your broader question, does it really matter? I think you see currently, I mean, on the high concentration that was granted with TAVA. I mean, it hasn't, and that was granted in May. It hasn't, hasn't done anything in terms of overall performance and our overall growth. We see continued growth there.

Speaker Change: Payne on the private label side. Thanks.

Speaker Change: Yeah, Jason, I'll take the last question first, and I'll hand it over to Matt to discuss the EBITDA question. So in regards to interchangeability, right now, you know, Samsung's been able to get the designation which was approved for the low-concentration pre-filmed syringe and the single-dose vial presentations.

Speaker Change: But to your broader question, does it really matter? I think you see currently, I mean, on the high concentration.

Speaker Change: that was granted with TAVA. I mean, it hasn't and that was granted in May. It hasn't hasn't done anything in terms of overall performance and our overall growth. We see continued growth there and but we we feel that by the time

Kevin Ali: But we, we feel that by the time, by the time the, the exclusivity period wears off in next May, we'll be ready to essentially launch or rather to get the indication as well. So I don't see any type of any roadblocks in terms of continuing ongoing performance. We are the sole, sole winner of the VA business, for example, and interchangeability doesn't matter because of the fact you're the single source asset that you've got there.

Speaker Change: By the time the exclusivity period wears off in next May, we'll be ready to essentially launch or rather to get the indication as well.

Speaker Change: So, I don't see any type of roadblocks in terms of continuing ongoing performance.

Speaker Change: We are the sole winner of the VA business, for example, and interchangeability doesn't matter.

Matthew Walsh: So we've got, we've got a lot of confidence in Had Lima going forward and we'll have interchangeability when the time comes in terms of when that exclusivity period wears off, and I'll hand it over to Matt regarding the EBITDA question. Jason. Jason, in terms of talking about years beyond 2024, obviously, too soon for guidance, but directionally, we see holding margins where they are is a very realistic outcome for 2025, which is a significant statement given that the relatively modest LOE exposure that we have in the established brands portfolio; most of that's going to be hitting actually in 2025.

Speaker Change: because of the fact you're the single source asset that you've got there. So we've got we've got a lot of confidence in HADLIMA going forward and we'll have interchangeability when the time comes in terms of when that exclusivity period wears off. And I'll hand it over to Matt regarding the EBITDA question.

Matt: Yeah, Jason, in terms of talking about years beyond 2024, obviously too soon for guidance, but directionally.

Matt: we see holding margins where they are is a very realistic outcome for 2025, which is a significant statement given that the relatively modest LOE exposure that we have in the established brands portfolio, most of that's going to be hitting actually in 2025. So we do see that we have the ability to hold margins through that. And then once you get beyond 2025, then you start to see the ability for Organon to actually improve gross margins as we separate the manufacturing network away from Merck.

Matthew Walsh: So we do see that we have the ability to hold margins through that, and then once you get beyond 2025, then you start to see the ability for Organons to actually improve gross margins as we separate the manufacturing network away from Merck. Those opportunities are fairly substantial, and combined with the fact that we would generally see product mix improving more towards some of the growth products that we've put in place through business development since the spin contributes to that. And this all comes on top of a cost structure, which is largely now right-sized in place and from which we can generate operating leverage.

Speaker Change: Those opportunities are fairly substantial, and combined with the fact that we would generally see product mix improving more towards some of the growth products that we've put in place through business development since the spin contributes to that.

Speaker Change: And this all comes on top of a cost structure which is largely now right-sized in place and from which we can generate operating leverage.

Matthew Walsh: So we're pretty optimistic about the ability to hold margins and then grow them. Thanks much.

Speaker Change: So we're pretty optimistic about the ability to hold margins and then grow them.

Terence Flynn: Sure. Our next question comes from a line of parents, Flynn, with Morgan's family. Please go ahead. Thanks so much for taking the question, and congrats on the next one on five-year data.

Speaker Change: Yeah, thanks much.

Speaker Change: Sure.

Speaker Change: Our next question comes from a line of Terence Flynn with Morgan Stanley . Please go ahead.

Speaker Change: Thanks so much for taking the question and congrats on the next one on five-year data. I was just wondering if you can give us your latest insight on how you're thinking about, you know, the pricing inputs for that product and then the the ramp of conversion and would the plan be to discontinue the three-year product? Thank you.

Terence Flynn: I was just wondering if you can give us your latest insight on how you're thinking about the pricing inputs for that product, and then the ramp of conversion, and would the plan be to discontinue the three-year product? Thank you. Yeah, Terence. So just for clarity, the five-year efficacy indication is essentially the same product. It's just that now we've got the indication for five years of efficacy. We're very excited about that data, and we're submitting in the process of getting ready for submission to the FDA. And so, in terms of price, we're still looking at that.

Speaker Change: Yeah, Terence. So just for clarity, the five-year efficacy indication is essentially the same product.

Speaker Change: It's just that now we've got the indication for five years of efficacy.

Speaker Change: We're very excited about that data and we're submitting in the process of getting ready for submission to the FDA. And so in terms of price, we're still looking at that. Obviously, we have that optionality when the time comes that we still have time for that to discuss that. But more importantly, it really starts to give us

Kevin Ali: Obviously, we have that optionality when the time comes. We still have time for that to discuss that, but more importantly, it really starts to give us a line of sight on the fact that this product will continue to be with us in a very robust manner till the end of the decade and possibly beyond. Just because of the fact, as I mentioned, our insertor device, which is very unique, and it is a very clear differentiator, has exclusivity until 2030. So from that perspective, if somebody were to come to market, they'd only be able to come to the market with a three-year indication, of which the whole market will be moved over to the five-year indication by that time in 2027, and they'll have to have their own device, which is no easy thing for FDA approval prior to 2030.

Speaker Change: A line of sight on the fact that this product will continue to be with us in a very robust manner until the end of the decade and possibly beyond.

Speaker Change: Just because of the fact, as I mentioned, our inserter device, which is very unique and it is

Speaker Change: It is a very clear differentiator has exclusivity until 2030. So from that perspective, if somebody were to come to market, they'd only be able to come to the market with a three-year indication of which the whole market will be moved over to the five-year indication.

Speaker Change: by that time in 2027. And they'll have to have their own device, which is no easy thing for FDA approval prior to 2030. So I think we're in great shape with regards to Nexplanon in the future, expanding that portfolio.

Kevin Ali: So I think we're in great shape with regards to the next one on in the future, expanding that portfolio.

Chris Shibutani: Our next question comes from a line of Chris. Shibutani, with Goldman Sachs. Please go ahead. Your line is open. Please go ahead. Apologies, I was on mute. Two questions, if I could. International pricing dynamics. Some of the regions that cover for us to get a sense for what the trends are. You seem to call out Japan in particular. I believe you expressed that there was some tougher-than-expected dynamics there. And then if I could just follow up a little bit on the China question that Umer had asked earlier, we have seen historically enforcement of the anti-bribery anti-corruption element impact different product segments, hospitals.

Speaker Change: Our next question comes from a line of Chris.

Chris Shibutani: Shibutani with Goldman Sachs. Please go ahead.

Speaker Change: Your line is open. Please go ahead.

Unknown Analyst: Apologies, I was on mute. Two questions, if I could. International pricing dynamics, some of the regions, it's tougher for us to get a sense for what the trends are. You seem to call out Japan in particular. I believe you expressed that there were some tougher than expected dynamics there. And then, if I could just follow up a little bit on the China question that Umer had asked earlier, we have seen historically enforcement of the anti-bribery, anti-corruption element impact different product segments, and hospitals. We saw that with vaccines brought up as a potential commentary.

Chris Shibutani: Apologies, I was on mute. Two questions, if I could. International pricing dynamics, some of the regions, it's tougher for us to get a sense for what the trends are. You seem to call out Japan in particular. I believe you expressed that there were some tougher than expected dynamics there. And then if I could just follow up a little bit on the China question that Umer had asked earlier, we have seen historically enforcement of the anti-bribery, anti-corruption element impact different product segments, hospitals. We saw that with vaccines brought up as a potential commentary. Is this a dynamic that your China business navigates?

Unknown Analyst: And then the second question would be about business development. Certainly, the Lilly transaction has been quite helpful. What is your sense of the potential to do similar and other types of deals from your capacity standpoint and your availability? Thank you.

Chris Shibutani: We saw that with vaccines, brought up as a potential commentary. Is this a dynamic that your China business navigates? And then second question would be about business development. Certainly, the lily transaction has been quite helpful. What is your sense for the potential to do similar and other type deals from your capacity standpoint and the availability? Thank you.

Speaker Change: And then second question will be about business development. Certainly the Lilly transaction has been quite helpful. What is your sense for the potential to do similar and other type deals from your capacity standpoint and the availability? Thank you.

Kevin Ali: Thanks for the question, Chris. So let's take that question, regards to the effect of the anti-corruption campaign in China. That was a short-lived issue that we went through. I think in the Q3 or so last of last year. We've washed through that. We don't see any, any essentially any remnants on any parts of our business, any parts of the portfolio products we have in China. Things are kind of going back to what I would consider to be the normal state of affairs and normal business metrics. And we're going to see mid single-digit growth in China in the second half of this year.

Speaker Change: Thanks for the question, Chris.

Speaker Change: So, let's take that question in regards to the effect of the anti-corruption campaign in China.

Speaker Change: That was a short-lived issue that we went through, I think, in the...

Speaker Change: I think it's Q3 or so of last year.

Speaker Change: We've watched through that. We don't see any remnants on any parts of our business, any parts of the portfolio of products we have in China. Things are kind of going back to what I would consider to be the normal state of affairs and normal business metrics. And we're going to see

Kevin Ali: And I think washing out whatever we face in terms of headwinds from round eight and VVP for the first half and also some fertility slowdowns, but going forward. I see some more robust growth in China in 2025 and beyond as we'll have kind of pass through this VVP storm of sorts.

Speaker Change: Mid-single-digit growth in China in the second half of this year and and I think Washing out whatever we faced in terms of headwinds

Speaker Change: from Round 8 and VVP for the first half and also some fertility slowdowns. But going forward, I see some more robust growth in China in 2025 and beyond, as we'll have kind of passed through this VVP storm of sorts.

Kevin Ali: And in regards to the international reference pricing. That really was more of a of something that China was kind of pulling forward and that hasn't really affected as much. So far, in terms of our negotiations with the Chinese government, we've landed in a very positive place when it comes to that.

Speaker Change: And in regards to the international reference pricing, that really was more of something that China was kind of pulling forward, and that hasn't really affected us much.

Speaker Change: So far, in terms of our negotiations with the Chinese government, we've landed in, I think, in a very positive place when it comes to that. And finally, in regards to more of Tuckin's.

Kevin Ali: And finally, in regards to more tuckings like the likes of which we did with Lily, we're very pleased with the Lily deal. I think it's off to a really solid start. And we're going to be doing more of those, but that would, that's what I would call part of our organic business strategy. It's just good hygiene, and we'll continue to be able to have plenty of capacity to do more and more of those type of tucking deals going forward, which are, I think, very, very nice. And then they proved to be very, very essential to our strategy going forward.

Speaker Change: We're very pleased with the Lilly deal. I think it's off to a really solid start.

Speaker Change: and we're going to be doing more of those, but that's what I would call part of our organic business strategy.

Speaker Change: It's just good hygiene, and we'll continue to be able to have plenty of capacity to do more and more of those type of tuck-in deals going forward, which are, I think, very, very nice and they prove to be very, very essential to our strategy going forward.

Matthew Walsh: And just to add to that, Chris, the reason why we're able to do those deals is because they're generally characterized by relatively modest up front payments. And most of the compensation is it was actually based on success-based milestones. Thank you.

Speaker Change: Yeah, and just to add to that, Chris, the reason why we're able to do those deals is because they're generally characterized by relatively modest upfront payments, and most of the compensation is actually based on success-based milestones.

Chris Schott: Thank you.

Kevin Ali: That concludes our Q&A session.

Kevin Ali: I will now turn the call back over to Kevin Ali for closing remarks. Marks. Thank you, and thanks everyone for joining us today. We are, as I said in my introductory comments, we're very encouraged about our progress here today, and we're confident, very confident in our ability to deliver the performance ranges. We've outlined here today, and we look forward to continued investor engagements throughout the quarter and through the year. Thank you very much.

Speaker Change: Kevin Halchak, Kevin Ali, Matthew Walsh

Speaker Change: That concludes our Q&A session. I will now turn the call back over to Kevin Ali for closing remarks.

Operator: This concludes today's call. You may now disconnect.

Operator: This concludes today's call.

Operator: You may now disconnect. Please wait.

Speaker Change: This concludes today's call. You may now disconnect.

Operator: The conference will begin shortly. Thank you very much.